Express Catering Serves Up Stronger Profits

Driven by a reduction in cost of sales, Express Catering Limited (ECL) reported a net profit of US$1.01Mn for its first quarter ended August 31, 2024, a 19.7% increase relative to the US$843.11K recorded in the prior period.
During the period, revenue grew by 1.2% to US$6.48Mn despite a 7.9% (or 56,916) decline in passenger traffic at Sangster International Airport. The passage of Hurricane Beryl, resulted in the slowdown in passenger traffic during the quarter. The company expects a recovery, with increased travel towards the end of 2024.
Additionally, ECL implemented price increases across most offerings in August 2024, contributing to better margins and improving its Cost of Sales (COS) ratio by 2.82 percentage points to 29.96%. ECL expects an additional 1.5% improvement in the COS ratio in the following quarter as the full impact is realised. Overall, COS decreased by 7.51% (or $157.53K) to US$1.94M, resulting in a 5.5% gross profit improvement to US$4.54Mn.
Administrative expenses for the quarter declined by 13.2% to US$1.85Mn but was partially offset by an 11.4% increase in salaries and wages due to the 15.4% increase in the national minimum wage on June 1^st, 2024. However, savings in occupancy costs helped mitigate some of the cost pressures from salaries.
During the quarter, ECL resumed its dividend payments, and moving forward, the company expects continued growth fuelled by the anticipated rise in visitor arrivals with the addition of over 1000 new hotel rooms in 2024.
ECL’s stock price has decreased by 15.0% since the start of the calendar year. The stock closed Thursday’s trading session at $3.40 and currently trades at a P/E of 21.4x, which is above the Junior Market Average of 17.7x

(Sources: JSE and NCBCM Research)